Frigid temps heated up January sales

CHICAGO (MarketWatch) -- Winter, which finally arrived in the last weeks of January, may prove to be a plus for retailers when they turn in their sales results later this week but margins could still be pressured.

Thomson Financial is projecting that same-store sales, the industry's key growth measure of receipts rung up at stores open longer than a year, will rise 3.2% over last year's results.

That's considered solid given comparisons with last year's unusually warm January when consumers got out and shopped hard. Same-store sales then climbed a sharp 4.9%.

January is largely considered a clearance month and industry analysts believe the wicked cold that blanketed much of the U.S. in the second half of last month helped retailers get rid of heavy coats, wool pants and cashmere sweaters that weren't selling in December.

It helped, too, that many shoppers used Christmas gift cards as well as their own cash - likely ringing up higher tallies than they might have.

But the frigid temperatures probably also put the freeze on shopping for cotton blouses, open-toed shoes and other spring clothing that hit stores late in the month. Because the early spring collections are sold at full prices, soft sales could put a dent in profit margins.

"We believe retailers were able to clear out excess winter inventory and as a result, January sales numbers got a boost," Goldman Sachs analyst Adrianne Shapira said in a research note.

"However, these sales may have limited profit implication in the fourth quarter, given heavy clearance," she said.

Bill Dreher thinks that could turn out to be sector specific with the biggest impact to apparel retailers like Gap
GPS, +1.70%
or Ann Taylor
ANN, +0.23%
that rely on middle- and lower-income shoppers who tend to buy merchandise that they can use immediately.

"We expect the higher-end retailers who cater to customers whose purchasing decisions are driven more by the fashion cycle than the weather cycle were less exposed to this mix issue," the Deutsche Bank analyst said in a note to clients.

"Discount and warehouse clubs may have seen a benefit to winter seasonal sales like snow removal (merchandise), sale and heaters in addition to soups, hot chocolate and over-the-counter cough and cold remedies," he said.

The best year-over year results are projected to come out of the department-store sector. According to Thomson Financial, same-stores sales at department stores should rise a cumulative 3.7%. However, last year department stores had the worst showing, up only 2.3%.

Dreher, for one, thinks the department-store group's numbers will be considerably stronger than Thomson Financial's expectations, owing mostly to consolidation. He counts 133 closed department stores since last February that left roughly $172 million in sales up for grabs last month.

The biggest benefactors: Federated Departments Stores
FD
and Nordstrom, Inc.
JWN, +0.26%
which he thinks will turn in results that are well above each company's projections.

But he warned that these "unusually strong" department-store results will normalize soon.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.